25.25.9 Revenue Protection Prisoner Lead Procedures

Manual Transmittal

September 26, 2016

Purpose

(1) This transmits revised IRM 25.25.9, Revenue Protection, Prisoner Lead Procedures.

Material Changes

(1) Editorial changes made throughout the IRM section.

Effect on Other Documents

IRM 25.25.9 effective 8-15-2015 is superseded effective 10-01-2015 This IRM also incorporates the following IRM Procedural Updates (IPUs): IPU 16U0358, 16U0731, and 15U1409.

Audience

Campus employees in Integrity & Verification Operation, Return Integrity and Compliance Services

Effective Date

(09-26-2016)

Related Resources

The following IRMs should be used in conjunction with one another:

  • IRM 25.25.1, Return Integrity and Verification Revenue Protection Programs

  • IRM 25.25.2, Revenue Protection Screening Procedures for Individual Master File Returns

  • IRM 25.25.3, Revenue Protection Verification Procedures for Individual Master File Returns

  • IRM 25.25.4, Integrity and Verification Identity Theft Return Procedures

  • IRM 25.25.5, Revenue Protection Special Handling Procedures

  • IRM 25.25.6, Taxpayer Protection Program

  • IRM 25.25.7, Automated Questionable Credit Program

  • IRM 25.25.8, Revenue Protection External Leads Procedures

  • IRM 25.25.9, Revenue Protection Prisoner Lead Procedures

  • IRM 25.25.10, Frivolous Return Program

Kenneth C. Corbin
Director, Return Integrity and Compliance Services
Wage and Investment Division

Blue Bag Screening and Processing Procedures

  1. The receipts will be date stamped and sorted into the following categories:

    • Tax returns

    • Returned refund checks

    • Correspondence

    • Undeliverable IRS mail addressed to inmates

  2. Blue Bag tax returns will be assigned to tax examiners who will screen the returns according to IRM 25.25.2.15, Prisoner Returns. If the person is not considered a prisoner (for screening purposes), screen the return according to the Data Mining Screening Tree see IRM 25.25.2.2, Data Mining Screening.

    Reminder:

    All live returns will be processed per the Funny Box Procedures in IRM 25.25.2.8, Screening Pipeline Questionable Returns.

    Note:

    If documentation is received disputing the incarceration dates shown in EFDS or in IDRS on CC FTBOLP, verify the documentation and add to the FTBOL -2016 spreadsheet located on the Austin shared drive.

  3. Review the Participating Prisons Listing for the source from which the correspondence/return/check was received. If the source is not present on the listing, update the new source with all fields onto the spreadsheet.

Photocopies of Returns

  1. Review IDRS to determine why a photocopy of the return was mailed:

    • Did another area request a copy of the return? If the photocopy was requested by another area route to the other area.

    • Did the original return complete processing (Transaction Code (TC) 150 posted)?

    • Is the return, an original? Send the return to be processed.

    • Check Account Management Services (AMS) for any history.

  2. After completing all possible research and a determination cannot be made why the taxpayer sent in the photocopy of the return, destroy the photocopy as classified waste.

General Agreement on Tariffs and Trade (GATT) Returns

  1. Legislation in 1994 implementing part of the General Agreement on Tariffs and Trade (GATT) (IRC §32(c)(2)(B)(iv)), excluded amounts received for services provided by an inmate at a penal institution from the definition of earned income for the earned income tax credit (EITC). GATT returns are identified when prior year or current year Command Code (CC) IRPTR indicates that the wages and withholding for prisoner returns are valid and the return claims EITC or a refundable credit that uses EITC’s definition of earned income.

  2. Returns filed by full year prisoners, containing wages/withholding earned while incarcerated, regardless of filing status, are not entitled to the following refundable credits:

    • Earned Income Tax Credit (EIC)

    • Additional Child Tax Credit (ACTC), when claiming 2 or less children

    • Making Work Pay Credit (MWPC)

    • Recovery Rebate Credit (RRC)

  3. If you receive a prisoner check that falls under GATT criteria, please forward to Fresno Integrity and Verification Operation (IVO).

    • PO Box 24012, Fresno, CA 93779, Stop M2004

  4. If working prisoner check in Fresno IVO, please take the following actions:

    • Confirm account associated with check meets GATT criteria.

    • Input transaction code (TC) 290 0.00 with hold code (HC) 4.

    • Monitor for posting of TC 290 and TC 841.

    • Once TC 841 posts, refer the case to Automated Questionable Credit Program (AQC), using the manual referral spreadsheet.

Form 1040-X, Amended U.S. Individual Income Tax Return

  1. If a Form 1040-X, Amended U.S. Individual Income Tax Return, is received follow IRM 25.25.2.11(2), Amended Returns. The Tax examiner (TE) will send the Form 1040-X, (amended return) and RICS IVO AR Adjustment Request Form to Accounts Management (AM). See Exhibit 25.25.2-5, RICS IVO AR Adjustment Request Form.

  2. If there is an open Exam case, follow CC AMDIS routing.

  3. Add a note in EFDS "BF1040XGOOD" or "BBF1040XBAD" .

Blue Bag Correspondence/ID Theft Correspondence

  1. Blue Bag Correspondence is mail received from prison officials. The mail has been intercepted or is being returned by the prison officials. Intercepted mail is mail from an inmate at the prison and could include various types of correspondence, such as:

    • Questions why a refund is being held

    • Confirmations of payments

    • Requests for blank tax forms and publications

    • Power of attorney letters

    • Potential identity theft issues

    • Responses to open cases (e.g., open Exam cases, open Criminal Investigation cases, or responses to disallowance letters)

    • Address change requests

    • Frivolous correspondence

    • Misdirected inmate mail (e.g., mail addressed to non-IRS agencies or inmate mail addressed to family/friends)

    Note:

    All other issues need to be routed to the proper area.

  2. Other correspondence from the prison includes mail that was not written by inmates. Below are examples of correspondence from prisons:

    • Undeliverable mail from the IRS intended for an inmate

    • Undeliverable prison warden mail

    • Intercepted blank IRS forms and/or publications requested by inmates

    • Questions about the Blue Bag Program

    Note:

    Do not record this mail as prisoner mail. This type of correspondence is documented in a separate spreadsheet in the Blue Bag Inventory Tracking workbook. Use the "Prison Information" worksheet (not the Summary tab).

  3. Blue Bag ID Theft Correspondence is correspondence that discloses information about another inmate or includes a list containing Social Security Numbers (SSN), names, or other Personally Identifiable Information (PII) for individuals targeted as Identity (ID) theft victims. Refer the correspondence to the lead/manager. The lead/manager will provide the letter to the "FRE Analyst" . If ID theft affidavits or a Form 14039, Identity Theft Affidavit, is attached follow IRM 25.23.1.3, Wage and Investment - Accounts Management - Identity Protection

Prisoner Payments

  1. If a live personal check is received take the following actions:

    1. Complete Form 4287, Record of Discovered Remittance.

    2. Attach a photocopy of the personal check and any pertinent information to the Form 4287.

    3. Notate any important information on the check such as the taxpayer’s Social Security Number (SSN), tax period and form number for correct processing.

    4. Route the check to Campus Support to be processed, see IRM 3.8.46.4, Remittance Discovered at a Campus Support Site.

  2. Personal checks or taxpayer payments are usually accompanied by correspondence/ Computer Paragraph (CP) Notice. Route to the appropriate area only if there is additional information for that area. If there is no additional information provided, it can be placed in a classified waste bin.

Balance Due Accounts/Request for Blank Forms/Power of Attorney

  1. Take the following actions for balance due accounts and requests for blank forms:

    1. Check the Service Center Status

    2. Status 22, route to Automated Collection System (ACS)

    3. If not in Status 22, route to Compliance Services Collection Operations (CSCO)

    4. Input a Command Code (CC) STAUP as needed

  2. If a request is received from an inmate for blank forms and/or publications, send Publication 5024 , Order Notification for Prisoners, to the taxpayer and notate AMS "Request from inmate dated XX/XX/XX for blank publication(s) /form(s). Sent Publication 5024 to taxpayer." . If Account Management Services (AMS) shows the inmate was sent Publication 5024 and a subsequent or duplicate request is received, place in classified waste and take no further action.

  3. Route any Form 2848, Power of Attorney and Declaration of Representative, or request to add or delete information from the Centralized Authorization File (CAF) Unit to the CAF unit.

Form W-2 Information or Transcript of Account Information

  1. Request Form W-2 information or transcript of account information through the Transcript Delivery System (TDS). See IRM 21.2.3.5.8, Transcripts and Identity Theft.

Response to an Open Exam (L Freeze), Automated Underreporter (AUR), Transaction Code (TC) 922, Letters 105C/106C

  1. Open Exam (L Freeze) - Research Comand Code (CC) AMDISA for the primary business code for the location of the Examination and Employee Group Code (EGC). There is a link to the EGCs on Servicewide Electronic Research Program (SERP), see the Exam EGC contacts Tab.

  2. Automated Underreporter (AUR) (TC 922 DLN) - Route responses to Underreporter notices to appropriate AUR area.

Address Change Request (Form 8822)/Frivolous Correspondence/Misdirected Inmate Mail

  1. Address Change Request - In most cases, treat a Form 8822, Change of Address, that changes the taxpayer’s address from a prison address to a non-prison address, as classified waste. Do not change or update addresses for a full year prisoner unless there is an indication of the prisoners release..

    Exception:

    If there is an S- freeze for an undeliverable refund, the taxpayer is confirmed and wages verify good; route the inquiry to AM/Refund Inquiry Team to release the S- freeze. See IRM 21.5.6.4.38, S- Freeze, for more information about this module condition.

  2. Frivolous Correspondence - If the correspondence meets the definition of frivolous correspondence, send directly to the Frivolous Return Program in Ogden at: IRS-FRP, 1973 N Rulon White Blvd. M/S 4450, Ogden UT 84404. A frivolous position is one that has no basis in law or fact for the purpose of expressing dissatisfaction with the substance, the form, or the administration of tax laws by attempting to illegally avoid/reduce tax liabilities or to increase refunds by fraudulent or frivolous means. Internal Revenue Code(IRC)§ 6702 provides for the assessment of penalties for filing frivolous tax submissions. Additional information can be located in the links below::

    • Additional information can be found at the RICS Frivolous Return Program (FRP) website.

    • Frivolous Filer/Non-Filer Definitions can be located in Exhibit 3.11.3-11, Frivolous Filer/Non-Filer Review Box Criteria and Definitions.

  3. Misdirected Inmate Mail - Forward to the appropriate agency, family, or friend. If you notice an increase volume of misdirected family/friend mail, please notify lead/manager and they will notify the Data Management Operation Support (DMOS) analyst. Undeliverable IRS mail, notify the manager/lead and they will notify the DMOS analyst who will contact the prison.

Refund Inquiries

  1. Research the account and check the Electronic Fraud Detection System (EFDS) for current disposition. If there is an IVO -R or P- freeze on the account and verification is not complete, see the table below:

    If a letter discloses information about another inmate or includes a list of social security numbers (SSNs) EFDS Action IDRS Action
    All income document(s) (IDOC(s)) verify good Disposition all IDOC(s) that are in Contact Employer (CE) and refile the return If normal filing pattern is met, input Transaction Code (TC) 290 .00 to release the refund
    Some or all IDOC(s) verify Bad or Incorrect dollars Disposition all IDOC(s) that are in CE and push to scheme per state mapping
    Schedule C or Household Help Income (HSH)
    • Review the account to determine if the current return meets taxpayers’ normal filing pattern.

    • If normal filing pattern is met, refile return and update notes in EFDS

    • If normal filing pattern is not met, push to scheme, stop the refund, see IRM 25.25.2.4, Stopping / Releasing the Refund, and forward to Exam on referral spreadsheet.

    Unsubstantiated wages or withholding If the wages and/or withholding cannot be verified per Information Returns Processing Transcript (IRPTR) data, review other internal sources for the IDOC(s) to verify or push to scheme see IRM 25.25.3.1, Verification of Income Take no action
  2. If you click the CE button and it is in Hold "SA Requested" and the TE is unable to place back in "SA Requested" , the TE can edit the employer information. The employer notes will pop up, requiring a note to be input. Input a “.” and close the notes. Disposition the return and put "Hold On Rest" in the Group Disposition. After that, put the employer back into "Hold Other" and then give your lead the Employer Identification Number (EIN) so that it can be placed back in Hold "SA Requested" .

  3. If the return is in Scheme, Tracking And Referral System (STARS) follow table below:

    Note:

    A reason must be entered in the return's STARS or EFDS notes section whenever requesting a return be deleted from STARS.

    If EFDS Action IDRS Action
    Return is bad or incorrect dollars and no Computer Paragraph (CP) 05A has been sent or CP 05A sent prior to date of correspondence Do NOT release refund.
    All IDOC's verify Good Close the STARS disposition and input appropriate disposition note. Input TC 290 .00 to release refund to taxpayer
    Return is bad or Incorrect dollars and STARS disposition is "NR" or "Blank" Change STARS return status to "CA" or "CE" and enter note: "PR CORR rec'd Income does not verify" . Update STARS return status to" CA" or "CE" Do NOT release refund.
    Return is bad or incorrect dollars and STARS disposition is "OTHER" than "NR" or "Blank" and disposition date is over 60 days old Change STARS return status to "CA" or "CE" and enter note: "PR CORR rec'd Income does not verify" . Update STARS return status to "CA" or "or CE" Do NOT release refund
    Return is bad or incorrect dollars and STARS disposition is "OTHER" than "NR" or "Blank" and disposition date is within 60 days Do not update STARS disposition Do NOT release refund

Prison Leads Involving Refund Checks

  1. Leads are received in Fresno from prisons regarding refund checks issued by the Department of Treasury.

    Note:

    Other sites receiving a prison lead regarding prisoner refund checks should route the lead to Fresno, fax number 855-853-0281.
    Mailing Address is - IRS PO Box 24012 Stop M2004 Fresno, CA 93779

    .

  2. Research the prisoners account using the following command codes:

    • Command Code (CC) IMFOLC - Check number for SSN and tax year (IMFOLC 2309–01234567)

    • CC FTBOLP - Compare the information provided to the information in the Electronic Fraud Detection System (EFDS)

    • CC IRPTRO - Check for possible valid income sources, (IRPTROXXXXXXXXX2200700 where XXXXXXXXX is the taxpayer’s SSN)

      Note:

      Input Social Security Number (SSN) with no dashes, number 2, tax year, and 00.

  3. Research Electronic Fraud Detection System (EFDS) for prior year scheme:

    • Check by SSN

    • Check by name

    • Check for Earned Income Tax Credit (EITC) if wages are good

    • Check for other unallowable refundable credits

    • Check IDRS for possible cross reference (X-ref) SSN, prisoners will transpose or use different SSNs to conceal their true identity

  4. If return is not in a known scheme and the prisoner has not been in prison all of the appropriate tax year, do not recall the check.

  5. If research on the account identifies questionable items on the return and the refund may be incorrect, fax Memorandum for Return of Erroneously Issued Income Tax Refund Check. The memo must be signed by the supervisor or the acting supervisor prior to faxing to the prison. Follow guidance in IRM 11.3.1.11, Facsimile Transmission of Tax Information.

  6. Update the 201X, Prison Check Request Spreadsheet, located on the Austin shared server.

  7. Keep a copy of the memo and fax sheet in the required Prisoner Binder.

  8. On the return associated with the refund check, update EFDS notes to reflect changes, order return, open an IDRS control base and leave a history item as follows:

    • Control base - Acton - "C#,PRSLEAD,A,MISC*,*"

    • History item - "H, DONOTRFUND"

  9. Once the refund has posted to the account, push the return to Scheme, Tracking And Referral System (STARS).

  10. Close the case control.

Processing Returned Prisoner Treasury Checks

  1. All prisoner checks received in Integrity and Verification Operation (IVO) will be sent to Fresno.

    Note:

    Route other payment types (money orders or checks payable to the Department of Treasury, etc.) to the appropriate campus Submissions Processing (SP) Payment Processing Unit (PPU) function.

  2. Fresno (Only) Tax Examiners (TEs) will follow procedures below in IRM 25.25.9.14, Processing Returned Prisoner Treasury Checks-FRESNO ONLY

Processing Returned Prisoner Treasury Checks- FRESNO ONLY

  1. These instructions should be followed by Fresno; all others see IRM 25.25.9.13, Processing Returned Prisoner Treasury Checks.

  2. When processing prisoner checks complete the following:

    1. Make sure each check is stamped “Non-Negotiable” or “VOID”

    2. Complete Form 3210, Document Transmittal for Remittances, and follow the instructions to complete the form

    3. Route the checks with the completed Form 3210, Document Transmittal directly to:
      Regional Finance Center (RFC), Department of the Treasury, Attention: Mail Room Leads, PO Box 51315, Philadelphia, PA 19115

  3. Regional Finance Center will acknowledge receipt of the check by returning a copy of Form 3210, Document Transmittal. Bureau of Fiscal Services (BFS) will void the check and return the credit to the appropriate tax module.

  4. Monitor the account for the credit posting.